Still think this whole show can't go down the tubes???????????

General Real Estate Investing
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Bear Stearns today had to come up with $3.2 BILLION to keep a hedge fund from going under that had invested heavily in sub-prime loans.

They didn’t do it out of the goodness of their hearts. They own this JUNK. Micheal Metz from Oppenhiemer called it “an open ended black hole” Comforting isn’t it?

So what? Why do we care? I buy houses dude, not bonds. We should all care because when this goes, and in my opinion IT WILL. Interest rates with blow up. The stock market will tank, THEN things will get interesting.

I’ve had some great discussions on this site about this very subject with some very smart people…This is NOT LOOKING GOOD.

Greenspan recently said in a very unreported interview that “markets should not under estimate how quickly excess liquidity could dry up”

Google “Bearn Stearns” and read what’s happening. Liquidity IS drying up. Watch, just watch. The fuse has been lit.

2

Chicken Little once said that the sky is falling. Not sure if that was bird poop that hit him in the head or that the sky was actually falling. petemfa, your such a downer. Everytime I read your posts I want to go get a regular job down at the factory. BOOOOOOO!!! :flush

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Hahaha- you stole my post, Jared. The Chicken Little reference was too easy though

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NOT THAT THERE IS ANYTHING WRONG WITH A FACTORY JOB! Just had to clear that up. Come on Gregg… Chicken Little was GENIOUS! LOL!! :beer

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Chicken Little once said that the sky is falling. Not sure if that was bird poop that hit him in the head or that the sky was actually falling. petemfa, your such a downer.

For the record, I think Petemfa is absolutely right! Just a year ago, I kept hearing that the real estate bubble wouldn’t pop because somehow this time things are different. Well, guess what? The bubble popped! The National Association of Realtors just reported that we’re up to an 8.9 month supply of houses. Here in Ohio, 22% of mortgage brokers have gone out of business since January 1st! Combine that with the avalanche of pending foreclosures, the subprime fiasco, the change of power to the party that likes to raise taxes, etc. What’s that spell? TROUBLE!

I’m with you Petemfa!

Mike

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So what do we do then Mike? Are we all out there looking for full time jobs? Can we still exist as real estate investors? What’s the answer?

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Jared you can be a life coach.

Keep your head in the sand buddy and I’ll be eating your lunch for the next 5 years.

It’s called planning, genius (by the way you spelled it wrong)

Keep your EYES open. I love putting this info up here and without fail the “genius” hits with the chicken little.

Hey Jared, Ive read your posts, do you even know what we’re talking about here? If I were you take all that optimism and get down to Florida, I hear there’s great money in pre-construction condo’s. Factory jobs in Indiana??? Yea, I hear Fords hiring. Oh but lets not talk about that, it’s too depressing.

Think happy thoughts, think happy thoughts…

8

Okay little peter… what’s the answer? Besides my lack of spelling and lack of lunches for the next 5 years, what should we all do? Your obviously (did I spell that right?) the end all be all of this website… so lead us. Tell us what planning we should do. Big word confuse me so keep is simple GENIOUS (thanks for the correct spelling).

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Jared…you figure it out buddy, you have all the answers.

I just told you a train was coming at us and you told me quit complaining.

Anyone ELSE wants to know what I’m doing let me know.

Jared…THINK…It might scare you to find what you’ve been missing.

It’s NOT what I’m doing it’s what YOUR doing.

People like you make intelligent folks stay away. This is a very complex issue, to waste my time with someone who refers to an economic disaster in the making as “Chicken Little” is just too stupid to bother dealing with.

10

Well today’s news has the bailout cut in half down to $1.6 billion. Its just an assumption of loans to keep the fund from defaulting. They have a second fund on shaky ground but why would you invest in something called “Bear Stearns High-Grade Structured Credit Enhanced Leveraged Fund”. If you can’t understand an investment in the first 30 seconds you probably shouldn’t be in it.

11

71tr,

the part that scares me is the PERCEPTION of addditional problems in these markets. As I’m sure you are aware these things can become self generated.

It bares watching. If this seaps into the credit markets (which is where it is anyway) it could have an impact on interest rates and liquidity. THAT is what can effect ALL of us.

It could work out to a HUGE buying opportunity, the thing is if you’re sitting at the wrong side of this when, and if, it goes you could be hurt very badly. I would not want to be into ANY flips that I held paper on.

I can’t predict the future, some others here (excluding Jared) have made very intelligent arguements to the contrarary. Time will tell.
BUT… Hope for the best and PLAN FOR THE WORSE.

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I think I am just going to be a life coach… I have no idea what I’m doing and I must be partially retarted. Thanks for the insight pete. :beer

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Come on folks where is your thinking cap. This is the down market and there are a ton of HIGH SPENDING investors that are taking advantage of this market right now. THey are dumping their cash in the market by the billions picking up anything that is going for .60 cents on the dollar or better. If you can find and wholesale those deals you can survive.I am.

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If your buying anything for 60 cents on the dollar you should be OK.

I’m not saying DON’T invest, just be VERY careful where and how.

It still comes down to buying low. BUT…Let’s take Florida for example prices have dropped, but IMHO that state has a LONG, LONG way to go. Sky high insurance rates due to hurricanes, property taxes that are higher than the Northeast. (remember when people moved INTO Florida BECAUSE of taxes) Now they’re moving OUT because of them. Buying a $500,000 house in Florida for 60 cents on the dollar still looks like a loser to me. Combine this with some type of economic “event” WOW, lot’s of peole get hurt.

Here’s what I’m doing, it seems to be working in the Northeast…

I’ve been buying STRICKLY low end (starter) homes, not anything in bad neighborhoods, just low end. Instead of pouring a lot of money into them fixing EVERYTHING, I fix just enough to get the bank to finance and THAT’S IT. I leave the handy man stuff to the new owner, price 'em LOW and their selling. I purchased 2 houses, one street apart, both 3 bed ranches (ton’s of them in this neighborhood, all the same)
First one I did a complete retail rehab, the second I fixed just the major stuff, put them both on the market. The handyman sold FIRST day. The rehab took 3 months. I made the same net on both with half the work on the handyman. 4 more since, longest time on market???

2 weeks!!!

I think what’s going on here is that a decent structurally sound handyman special competes with much less out there. Because of the wave of refinancing that we all just lived through many people updated and remodeled their homes. Now their trying to get that money out of them, add to this the 3 dozen TV shows about how to get your house ready to sell and BINGO! You’ve got 8000 houses that are priced the same and look the same. That handyman comes along $20,000 under the retail stuff and it gets people moving.

No doom and gloom here, JUST common sense. Look around you,
The democrats, like it or not, are going to the White House, You think THEY won’t tighten lending after this fiasco we’re watching play out??
BET ON IT! THAT’S what I’m saying. BET ON IT, and plan accordingly.

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So what do we do then Mike?  Are we all out there looking for full time jobs?  Can we still exist as real estate investors?  What's the answer?

Jared,

I’m not looking for a job! Yes, we can still exist as real estate investors, IF WE ARE PREPARED FOR THE CHANGING MARKET. The answer is that the amateurs will rapidly be going out of business. As you’ve already seen from posts on this forum, people who paid too much for their rentals; their pre-construction; their flips are going to lose big time. The key to succeeding in a down market is to understand where the demand is. As homeowners lose their homes to foreclosure, there will be increased demand for rentals. In markets that are still growing (few and far between), there will still be some demand for flips. In areas where there was a big bubble, there will likely be a glut of inventory as the speculators get washed out of the market. In these areas, there won’t be much demand for housing and rents may drop as speculators try to rent their overpriced property in a final act of desperation.

So, look at your market realistically and determine where the demand will be. Be prepared to supply that demand!

Mike

16

Of course we can survive and of course we should prepare for the changing market. That’s how this whole game works. My whole reason for jumping into this thread was to say that not everything is as negative as pete makes it out to be. Again, my opinion. I am not burying my head in the sand or living in a butterfly and gumdrop world, I get this is a tough business and it is tough for newbies to break in, but it does work. I strongly agree with Mike when he says look at your market realistically and determine where the demand will be and then supply that demand.

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I’m rooting for you, Jared. And I’m right behind you. My parents did 30 flips (15 of their own and 15 that they inherited from THEIR parents) and they said the entire time they were doing them, everyone was warning them that the economy was about to crash and they would be bankrupted. My father has passed away but my mother has been living off of her investments for years.

There sure do seem to be quite a few gleeful “can’t wait to watch the newbies get washed out of the biz I’ve been in for 20 years” posts, eh?

Topaz

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TODAY, Just released earnings statement by Lennar (big home builder)

Leenar CEO Stuart Miller warned…" The housing market continued to deteriorate throughout the 2nd quarter. The supply of new and EXSISTING homes has continued to increase resulting in declining home prices across our markets"

I guess it’s just me. I’m too negative. Guess it’s that 20+ years experience talking.

Can’t see how this could possibly effect our ability to make money?

I love selling homes in declining markets.

Almost 9 months supply of homes on the market now, up from last year. That’s positive because I don’t have to rush to finish my projects.

But you know? I think next year the whole market will rebound and go higher than ever before!!! Peace will break out across the middle east. Private equity and hedge funds will donate profits to all those poor folks with subprime mortgages so they don’t lose their homes, and New Orleans will repair itself when a giant magic wand appears over it!!
I think the Democrats will solve all our problems, the DOW will hit 25,000 and Jared get’s a new career working with TONY ROBBINS!!!

I like this positive approach! Hey gotta go, just got a line on a Florida pre-construction condo…CHEAP!!!

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There sure do seem to be quite a few gleeful "can't wait to watch the newbies get washed out of the biz I've been in for 20 years" posts, eh?

How did you get that out of a post with the latest news on the sub-prime fiasco and the possible affect on liquidity? I appreciate Petemfa’s posts and find them very informative. It’s just silly to pretend that the market is in good shape when the facts are otherwise. The trick is to understand what the market will do and how you can make money. It seems to me that the information Petemfa posted helps all of us (including newbies). I certainly didn’t read anthing like “can’t wait to watch the newbies get washed out of the biz…”. Maybe I need new glasses.

Petemfa - keep up the informative posts. I appreciate your efforts!

Mike

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A few points-- First, the thing that we need to be worried about is a deleveraging. While the Bear Stearns Hedge Fund is not a positive to the market, it’s probably not the shock to the system that will decouple everything. First, keep in mind that only accredited investors with a net worth of at least $1M and $200k are elgible to invest in hedge funds. Typically, investors in hedge funds are much higher net worth individuals, and mostly institutions. This fund in particular, is mostly institutions. I have done a decent amount if business with this particular fund-- there are some very smart people who have gotten it wrong. More than likely, the fund will get bailed out, a la Long Term Capital Mgmt, and it will go on status quo. However, if the fund is liquidated and doesn’t get absorbed well, it WILL have reverberations that will impact the economy. They may not be great, but it will affect the market. Couple this with poor homesales, interest rates rising and you will see more deleveraging. Cheap money for the past 10yrs+ cannot stay cheap forever. What will be the final straw? Who knows… but the market is not setting up for a positive event. The market will get worse-- its just a matter of magnitude. Personally, I think we will have a violent correction. No doc loans, rising rates, banks taking loan losses and increasing lending standards, higher defaults… all of this was after an above normal average for many years. We will see a reversion to the mean.